May 18, 2016

Long Awaited New Overtime Rules Issued

Posted in Administrative Exemption, Computer-related Occupations Exemption, Executive Exemption, Exempt/Non-Exempt Employees, Fair Labor Standards Act, Outside Sales Exemption, Overtime, Professional Exemption, Uncategorized tagged , , , , , , , at 1:15 pm by Tom Jacobson

time clockThe much-anticipated new overtime rules have been issued by the United States Department of Labor. The new rules will go into effect December 1, 2016 so employers will have until then to prepare.

The Society for Human Resource Management (SHRM) has published an excellent summary of the new rules, and I encourage you to review that. Then, contact me to discuss how to implement the new rules in your workplace.

Also, the new rules will be discussed at the 13th Annual West Central Minnesota Employment Law Update. There are still a few seats available at the seminar — click here for registration information.

For more information about these or other employment law issues, please contact me at taj@alexandriamnlaw.com.

The comments posted in this article are for general informational purposes only. They are not to be considered as legal advice, and they do not establish an attorney-client relationship. For legal advice regarding your specific situation, please consult your attorney.

Copyright 2016 Swenson Lervick Syverson Trosvig Jacobson Schultz Cass, PA.

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February 18, 2016

New Overtime Rules Could Result in Loss of Exempt Status for Salaried Employees

Posted in Administrative Exemption, Executive Exemption, Exempt/Non-Exempt Employees, Fair Labor Standards Act, Hours Worked, Professional Exemption tagged , , , , , , , , , at 4:58 pm by Tom Jacobson

new flsa overtime rules

Many salaried employees would lose their exempt status under the DOL’s new overtime rules.

The U.S. Department of Labor’s proposed changes to the nation’s overtime pay rules would have a profound impact on workplaces throughout the country. The impact would be the potential loss of exempt status for many salaried employees. To prepare, employers should familiarize themselves with the proposed new rule and review their pay practices to ensure compliance in case the new overtime rules take effect.

The new rules would increase the minimum salary an employee must be paid before s/he may be classified as exempt from overtime pay under the Fair Labor Standards Act. This means many employees who are now properly classified as exempt will no longer be exempt. Consequently, they would then be eligible for overtime pay if they work more than forty hours in a workweek.

The change would come about because the FLSA generally requires most U.S. employers to pay overtime (that is, one and one-half times the employee’s regular rate of pay) when employees work more than forty hours in a work week. However, certain categories of employees are exempt from that requirement. To qualify for some exemptions, those employees must not only perform certain duties as specified in the FLSA, but they must also be paid a minimum salary.

Currently, that minimum salary is $455 per week ($23,660 per year). Under the new rule, that threshold would more than double to $970 per week ($50,440 per year).

The impact can be illustrated with a hypothetical workplace where an employee is currently paid a salary somewhere between $24,000 and $50,000 per year and works an average of 45 to 50 hours per week. Assuming that employee meets one of the FLSA’s “duties” tests, the employee would likely be considered exempt and not entitled to overtime pay. Therefore, the employee would be paid the same regardless of how many hours s/he works in a week.

If the new rules take effect, the same employee would no longer be exempt, and s/he would be entitled to overtime pay for the extra five to ten hours of work each week. Therefore, the employer would need to increase the employee’s salary to meet the new threshold and maintain the exemption, or the employer would need to convert the employee to an hourly-rate employee and pay time and a half for any overtime.

The new rules have not yet gone into effect, and it is not entirely clear if and when they will. They were initially slated to take effect this spring. However, the Society for Human Resource Management reports that this may not happen until later this year. SHRM also reports there is a remote chance that Congress could overturn the rules using the Congressional Review Act and/or that the rules will be challenged in court.

In the meantime, employers should pay attention to the potential rule change and be prepared to change their pay practices to remain in compliance. Suggestions include:

  • Determine which currently exempt employees would no longer be exempt if the salary threshold increases;
  • Assuming an employee’s exemption would be lost under the new rules, decide whether to increase the employee’s salary to meet the new threshold or convert the employee’s salary to an hourly rate basis;
  • Budget for any increased overtime costs resulting from employees who would become eligible for it under the new rules;
  • Review scheduling issues to determine whether hours can be reduced to limit the overtime liability for an employee who must be treated as non-exempt;
  • Address morale issues that could result from any perceived “demotion” of employees from exempt/salaried to non-exempt/hourly status.

In addition, although the proposed new rules do not alter the “duties” test for FLSA exemptions, employers would be wise to take this opportunity to review their exempt employees’ duties to determine whether they actually meet those duties tests. This is because even if an employee meets the salary test (whether under the current or proposed new standards), that does not automatically mean the employee is exempt from the law’s overtime pay requirements.

For more information about FLSA exemption issues, please contact me at taj@alexandriamnlaw.com.

The comments posted in this blog are for general informational purposes only. They are not to be considered as legal advice, and they do not establish an attorney-client relationship. For legal advice regarding your specific situation, please consult your attorney.

Copyright 2016 Swenson Lervick Syverson Trosvig Jacobson Schultz Cass, PA

July 20, 2015

FLSA Misclassification Proves Costly for Local Employer

Posted in Administrative Exemption, Computer-related Occupations Exemption, Enforcement, Executive Exemption, Exempt/Non-Exempt Employees, Fair Labor Standards Act, Minimum Wage, Outside Sales Exemption, Overtime, Professional Exemption tagged , , , , , , , , , at 10:22 am by Tom Jacobson

US Department of Labor v Patel

Local hotelier ordered to pay $184,000.00 to settle wage violation suit.

A Fargo, ND hotelier with a property in Alexandria, MN will pay nearly $200,000.00 to settle a lawsuit brought by the US Department of Labor (see Court Orders Hotel Owner to Pay More than $180K in Back Wages, Damages to 200 Workers Across North Dakota, Montana and Minnesota, DOL Release No. 15-1294-DAK; Lawsuit Settlement Helps Hotel Workers in Alexandria, Echo Press July 16, 2015). The DOL alleged in the suit that Bharat I. Patel violated the Fair Labor Standards Act by failing to pay minimum wage and/or overtime rates to nearly 200 employees at a number of hotels, including the Country Inn and Suites in Alexandria.

More specifically, the DOL claimed that Patel misclassified nonexempt workers as exempt salaried employees (see US Labor Department Lawsuit Alleges Hotel Owner Owes $200K in Wages, Damages to 192 Workers at 13 Hotels, DOL December 16, 2104). This, the department said, resulted in these workers not receiving minimum wage for all hours worked and not being paid overtime. According to the DOL, the company also failed to combine hours for employees who worked at two locations in the same workweek and failed to maintain accurate records of all hours worked and pay rates.

The lawsuit was resolved via a July 10, 2015 consent judgment in which Patel denied any wrongdoing but agreed to pay $184,000.00 to settle the dispute. In addition Patel agreed to train managers on FLSA wage requirements and to provide workers information on wage laws and contact information for the DOL’s Wage and Hour Division for at least four years.

How are FLSA exemption mistakes made, and why are they so expensive? To answer that, one needs to understand the two basic principles of the FLSA’s overtime rule. First, the FLSA generally requires that employees be paid at 1.5 times their regular hourly rate for their overtime (that is, their hours worked in excess of 40 hours in a workweek). Second, some employees, such as certain executives, administrators and professionals are exempt from that overtime requirement.

Claiming such exemptions may seem simple, but the FLSA has complex definitions of who can lawfully be classified as an exempt executive, administrator or professional. Those definitions all include a requirement that these employees be paid a salary of at least $455.00 per week. They also include a “duties test.” This requires that in addition to the salary requirement, the employees’ actual job duties must meet certain criteria before the employees can be considered exempt.

Thus, one of the most common mistakes starts when employers wrongly assume that by paying someone a salary, they automatically become exempt from overtime. Often, the employers also give that person a title such as “manager.” Then, the employers allow or require those people to work more than 40 hours per week without paying for the overtime.

But paying someone a salary and calling them a manager (or some other authoritative title) does not make them exempt if they do not also pass the duties test for an FLSA exemption.

This mistake is expensive. When non-exempt employees are misclassified as exempt, they are entitled to recover all of the overtime they should have been paid during the preceding two years. Plus, they can recover an additional equal amount as liquidated damages and their attorney’s fees and court costs. These costs are compounded when multiple employees are at issue. And, as was the case in Patel lawsuit, employers can also be ordered to implement other remedial measures such as training.

The DOL’s recent rulemaking actions provide an additional reason for employers to pay close attention to these FLSA exemption issues. On July 6, 2015 the DOL proposed a rule that would raise the salary basis test from around $23,600.00 per year to approximately $50,000.00 per year. If implemented, the new rule would greatly reduce the number employees who would be exempt under the law.

As the Patel case confirms, FLSA exemption mistakes are costly. And, based on recent DOL activity, those mistakes could get even more expensive in the future.

If you are an employer that is wondering if your employees are properly classified under the FLSA, or if you are an employee who wonders if you have been misclassified and underpaid, please contact me at alexandriamnlaw.com or  taj@alexandriamnlaw.com.

The comments posted in this blog are for general informational purposes only. They are not to be considered as legal advice, and they do not establish an attorney-client relationship. For legal advice regarding your specific situation, please consult your attorney.

Copyright 2015 Swenson Lervick Syverson Trosvig Jacobson Schultz Cass, PA

September 12, 2014

FLSA: counting the cost locally

Posted in Exempt/Non-Exempt Employees, Fair Labor Standards Act, Overtime tagged , , , , , , at 11:08 am by Tom Jacobson

time clockA Douglas County, MN employer recently learned a costly lesson when it misunderstood who is and is not exempt from the overtime pay requirements of the Fair Labor Standards Act (FLSA).

In this case, an employee was given a “manager” title and paid a fixed salary, but the employee alleged that his duties were primarily custodial and customer service and did not fit within any exemption allowed by the FLSA. Applying the formula set by FLSA regulations, the employee converted his “salary” to an hourly rate ranging from $11.61 to $13.54 with an overtime premium ranging from $5.81 to $6.77 per hour.

Failing to pay an employee an additional $5.81 to $6.77 per hour may not seem like a terribly expensive mistake, but in this case the employee had evidence suggesting that he had worked about 640 hours of unpaid overtime during his last year of employment. This calculated to approximately $3,800.00 of unpaid overtime, but that wasn’t the end of the story. The FLSA also allows an employee to double the amount of unpaid back wages as liquidated damages, so using the employee’s figures, the $3,800.00 became $7,600.00.

To compound the problem, the employee claimed that the employer also withheld $1,300.00 of the his final wages in violation of Minn. Stat. § 181.13, thus triggering the 15 day wage penalty of that statute. This added another $1,700.00 to the employee’s claim.

Because these laws also allow the employee to recoup his attorney’s fees incurred in trying to recover his wages, he tacked them on as well. Those fees exceeded $4,000.00.

Thus, the employee argued that the employer’s $6.00 per hour mistake became a liability exceeding $14,000.00 (excluding the employer’s own attorney’s fees incurred in defending the claim). The case was eventually settled out of court with a confidential agreement between the parties.

The case illustrates how costly it can be when an employer improperly classifies a non-exempt employee as exempt under the FLSA. Simply calling someone a “manager” and paying her a fixed salary does not automatically make her exempt from overtime. This is because exemptions are highly dependent on the employee’s actual duties, not her title and form of pay. And, while an hour of unpaid overtime may not seem like a huge risk, when those hours accumulate over time and are doubled as liquidated damages, a few dollars can quickly become several thousand, especially when attorney’s fees and court costs are added. Moreover, it’s a much greater problem if multiple employees are involved.

For more information about FLSA exemptions, please contact me at alexandriamnlaw.com or taj@alexandriamnlaw.com.

The comments posted in this blog are for general informational purposes only. They are not to be considered as legal advice, and they do not establish an attorney-client relationship. For legal advice regarding your specific situation, please consult your attorney.

Copyright 2014 Swenson Lervick Syverson Trosvig Jacobson Schultz, PA

July 31, 2013

Things are not always as they seem

Posted in Americans with Disabilities Act, Disability, Discrimination, Fair Labor Standards Act, Minimum Wage, Overtime, Reasonable Accommodation tagged , , , , , , , , , , , , , at 4:50 pm by Tom Jacobson

IMG_5116 Edited“Why is Sam sticking his fingers in Spencer’s mouth?” That’s what ran through my head a couple of years ago when I snapped this picture of one of my sons and a teammate working at a swim meet. When you look closely, you’ll see that things are not always as they seem.

Things are not always as they may seem in the legal world, either. A while back I wrote about an employee who was found eligible for unemployment benefits despite her failure to report to work for two months. For more on that story, click here.

There’s also the more recent case of Lucas v. Jerusalem Cafe, LLC. where a number of workers who were unauthorized aliens sued their employer for overtime and minimum wage violations under the Fair Labor Standards Act. Because they were unauthorized aliens, our first reaction might be to question why they would have a right to sue for a FLSA violation or even collect wages in the first place. That’s what the employer argued, but the court disagreed, noting that “The FLSA does not allow employers to exploit any employee’s immigration status or to profit from hiring unauthorized aliens in violation of federal law.” Interestingly, the court also noted how the employer’s argument rested “on a legal theory as flawed today as it was in 1931 when jurors convicted Al Capone of failing to pay taxes on illicit income.”

But what if an employee sleeps on the job?  Shouldn’t he be fired? Not if waking him would be a reasonable accommodation for a disability under the Americans with Disabilities Act, according to the federal judge in Virginia who is presiding over the case of Riddle v. Hubbell Lighting, Inc.

Unemployment statutes, the ADA and the FLSA are just a few of the many employment laws where outcomes are not always what you might expect them to be. For a better idea of what those outcomes might be, please contact me at alexandriamnlaw.com or  taj@alexandriamnlaw.com.

The comments posted in this blog are for general informational purposes only. They are not to be considered as legal advice, and they do not establish an attorney-client relationship. For legal advice regarding your specific situation, please consult your attorney.

Copyright 2013 Swenson Lervick Syverson Trosvig Jacobson Schultz, PA

June 14, 2013

Fox outfoxed by interns

Posted in Fair Labor Standards Act, Interns and Internships, Minimum Wage, Overtime tagged , , , , , at 9:42 am by Tom Jacobson

I’ve previously written about the challenges associated with hiring interns. Generally speaking, except in limited circumstances, interns must be paid at least minimum wage under the Fair Labor Standards Act. That means that unpaid (or barely paid) internships may violate the FLSA.

As reported by The New York Times, Fox Searchlight Pictures is learning this the hard way via a lesson from a New York federal judge who has ruled that the movie maker violated the FLSA by failing to pay two interns who worked on the film, Black Swan. The same judge also ruled that a group of interns from various divisions of Fox Entertainment Group may proceed with their class action FLSA lawsuit.

What you need to know: Unless an internship program fits within narrow exceptions under the FLSA, interns will be subject to the minimum wage and overtime requirements of the FLSA.

For more information about this article, please contact me at alexandriamnlaw.com or  taj@alexandriamnlaw.com.

The comments posted in this blog are for general informational purposes only. They are not to be considered as legal advice, and they do not establish an attorney-client relationship. For legal advice regarding your specific situation, please consult your attorney.

Copyright 2013 Swenson Lervick Syverson Trosvig Jacobson Schultz, PA

April 10, 2013

The comp time myth – changes on the way?

Posted in Compensatory Time Off, Fair Labor Standards Act, Overtime, Uncategorized tagged , , , , , , at 9:25 am by Tom Jacobson

Strange fascination, fascinating me
Changes are taking the pace
I’m going through
Ch-ch-ch-ch-Changes

Changes — David Bowie, 1971

time clockLast week in The Comp Time Myth I commented on how the Fair Labor Standards Act (FLSA) prohibits the use of compensatory time (that is, paid time off in lieu of overtime pay) by private sector employers. That may be about to change.

Yesterday, U.S. House Republicans, led by Rep. Martha Roby (R-AL), introduced the Working Families Flexibility Act of 2013 (HF 1406). The law would amend the FLSA to allow private sector employers to provide paid time off for overtime hours worked. According to Rep. Roby, the Act:

• Allows employers to offer employees a choice between cash wages and comp time for overtime hours worked.  Employees who want to receive cash wages would continue to do so.

• Protects employees by requiring the employer and the employee to complete a written agreement to use comp time, entered into knowingly and voluntarily by the employee.

• Retains all existing employee protections in current law, including the 40 hour work week and how overtime compensation is accrued. The bill adds additional safeguards for workers to ensure the choice and use of comp time are truly voluntary.

•  Allows employees to accrue up to 160 hours of comp time each year.  An employer would be required to pay cash wages for any unused time at the end of the year. Workers are free to ‘cash out’ their accrued comp time whenever they choose to do so.

What you need to know: Despite the tremendous changes that have taken place in society — and particularly in the workplace  — over the last 75 years, the FLSA has not been substantially revised since it was passed in 1938. It’s time for a change. By removing the comp time prohibition, the Working Families Flexibility Act would give employers and workers a much-needed tool for creating the flexible workplaces that are necessary to meet the needs of today’s American families. Contact your congressional delegation to express your views on this proposed change.

For more information about this article, please contact me at alexandriamnlaw.com or  taj@alexandriamnlaw.com.

The comments posted in this blog are for general informational purposes only. They are not to be considered as legal advice, and they do not establish an attorney-client relationship. For legal advice regarding your specific situation, please consult your attorney.

Copyright 2013 Swenson Lervick Syverson Trosvig Jacobson Schultz, PA

April 3, 2013

The comp time myth

Posted in Compensatory Time Off, Fair Labor Standards Act, Overtime, Uncategorized tagged , , , , at 8:28 am by Tom Jacobson

Some days won’t end ever and some days pass on by.
I’ll be working here forever, at least until I die.
Dammed if you do, damned if you don’t
I’m supposed to get a raise next week, you know damn well I won’t.

Workin’ for a Livin Huey Lewis & the News, 1982 

time clockSometimes it feels like we’ll be working for forever. When it does, we look for any chance to get away, especially when we have some paid time off coming. And sometimes we need and value the time off more than the paycheck itself.

So, why not reward employees who work a bit of overtime by giving them paid time off in lieu of overtime pay? It’s a great concept: if employees work overtime (that is, more than forty hours in a workweek under the federal Fair Labor Standards Act), they “bank” the extra hours and use them like extra vacation or other paid time off in the future. Although it seems like a great concept, it’s prohibited by the FLSA unless the employer is a public agency that is a state, a political subdivision of a state, or an interstate governmental agency.

What you need to know: There are ways for private sector employers to provide a comp time benefit for exempt employees (that is, employees who are not covered by the FLSA), but such programs must be carefully written so as to not jeopardize their exempt status. More importantly, comp time cannot be offered as an alternative to overtime pay to non-exempt private sector employees. Public agencies may, however, offer comp time to non-exempt employees.

For more information about this article, please contact me at alexandriamnlaw.com or  taj@alexandriamnlaw.com.

The comments posted in this blog are for general informational purposes only. They are not to be considered as legal advice, and they do not establish an attorney-client relationship. For legal advice regarding your specific situation, please consult your attorney.

Copyright 2013 Swenson Lervick Syverson Trosvig Jacobson Schultz, PA

September 13, 2012

My Former Life as an Intern

Posted in Fair Labor Standards Act, Interns and Internships, Minimum Wage, Overtime, Trainees tagged , , , , , , , , , at 6:32 pm by Tom Jacobson

Me, at Congressman Oxley’s desk (spring, 1987)

During my final semester at the University of North Dakota, I was lucky enough to land an internship on Capitol Hill.  It was a remarkable experience. I was assigned to work with the press secretary for Rep. Mike Oxley from Ohio (long before Sarbanes-Oxley was ever on the radar). My introduction to the office went something like this. “Hi, Tom, I’m Mike’s press secretary, Sharon, and as you can see, I am very pregnant. I’m going to have this baby any day now, and while I’m on maternity leave, you’ll be doing my job.  Enjoy your time in Washington!”

The baby arrived within days, and so began my three-month stint as college student / intern turned rookie press secretary.

Photo I took of President Reagan entering White House Rose Garden (spring, 1987)

The stipend from the program sponsor didn’t come anywhere close to covering whatever minimum wage was at the time, but the education was priceless. I attended committee meetings and did all kinds of press secretary-ish stuff. I saw President Reagan at a Rose Garden press conference, and once I even shared an elevator with Iowa Rep. Fred Grandy (a/k/a “Gopher”from The Love Boat) (sorry, no photo of that!). I don’t recall if my reaction was being starstruck or realizing how odd politics really are. But I digress …

Internships are  a mainstay in our educational system, for they serve the invaluable purpose of giving students real world experience that simply cannot be taught in the classroom.  However, several companies, such as Fox Searchlight and Hearst Corporation, have recently been sued by interns who claim that their internships violated the Fair Labor Standards Act.

How so? Well, the FLSA generally requires that anyone who is employed must be compensated for the services they perform. The Department of Labor takes the position that in the for-profit private sector, interns are usually considered to be “employees,” and as such, they are entitled to minimum wage and overtime. However, the DOL also recognizes that if an intern fits within a very narrow exception established for “trainees,” the FLSA does not apply.  To meet this exception, all six of the following criteria must be met:

  • The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;
  • The internship experience is for the benefit of the intern;
  • The intern does not displace regular employees, but works under close supervision of existing staff;
  • The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;
  • The intern is not necessarily entitled to a job at the conclusion of the internship; and
  • The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

This test is more fully explained in DOL Fact Sheet # 71, where the DOL also notes that, “This exclusion from the definition of employment is necessarily quite narrow because the FLSA’s definition of “employ” is very broad.”

What you need to know:  As the Hearst, Fox Searchlight and similar cases play out, we will have a better idea of how this exception will be applied in future cases. In the meantime, employers who hire or who are considering hiring interns should be wary of the DOL’s narrow interpretation of “trainee,” which means that for the time being most interns will be considered employees who are entitled minimum wage, overtime, and the protections of the FLSA.

For more information about this article, please contact me at taj@alexandriamnlaw.com.

The comments posted in this blog are for general informational purposes only. They are not to be considered as legal advice, and they do not establish an attorney-client relationship. For legal advice regarding your specific situation, please consult your attorney.

Copyright 2012 Swenson Lervick Syverson Trosvig Jacobson Schultz, PA

May 27, 2011

Employees without time records? The DOL now has an app for that.

Posted in Fair Labor Standards Act, Hours Worked, Meal Periods, Overtime, Record Keeping tagged , , , at 10:31 pm by Tom Jacobson

In its ongoing effort to more aggressively enforce the Fair Labor Standards Act, the U.S. Department of Labor has introduced its first app.  It’s the DOL Timesheet app  which enables employees to use their smart phones to track their hours worked and wages owed.

In some respects, this is nothing new.  Employees have always had the right to keep track of their work hours, and the DOL  also provides printable calendars for tracking time and wages.  The DOL’s app simply provides a new tool that will make it even easier for an employee to do so.

It is an employer’s responsibility to keep records of the hours worked by its employees.  If those records are not kept, then in the event of a dispute over wages owed, overtime or any other time-keeping issue, the DOL’s new app may provide just the evidence the employee or the DOL needs to prove their case.

For more information about this article, please contact me at taj@alexandriamnlaw.com.

The comments posted in this blog are for general informational purposes only. They are not to be considered as legal advice, and they do not establish an attorney-client relationship. For legal advice regarding your specific situation, please consult your attorney.

Copyright 2011 Swenson Lervick Syverson Trosvig Jacobson, PA

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